Construction Costs are Increasing at a rate of 9.2% per annum.

According to ANZ, on a three-month average basis, the value of residential consents per square metre – a proxy for construction cost inflation – rose 9.2% y/y in October. This is down from over 13% in September, but remains elevated.

Notably, the implied measure of construction costs from the CPI has started to ease, falling to 5.4% y/y in Q3, from 6.4% y/y in Q2.

With house price growth cooling, it’s going to be interesting to see if construction costs continue to grow as quickly.  Based on our own construction experience over the past 14 years, we expect they will.

John Kenel, Assured